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GLOBAL MARKETS-US retail sales hurt stocks; euro falls broadly
July 16, 2012 / 3:13 PM / 5 years ago

GLOBAL MARKETS-US retail sales hurt stocks; euro falls broadly

* Euro hits 3-1/2-year low against British pound, weak vs dollar

* World shares lower, markets eye stimulus hints

* German debt, Treasuries gain on safe-haven flows

By Wanfeng Zhou

NEW YORK, July 16 (Reuters) - World stocks slipped on Monday after a surprise drop in U.S. retail sales in June and the euro hit a 3-1/2-year low against sterling as investors fretted about the delay in making bailout funds accessible to troubled euro zone states.

Concern about a slowing global economy spurred a rally in safe-haven government debt prices, driving yields lower. The yield on benchmark 10-year Treasury notes fell to 1.442 percent, matching the level set on June 1, which was the lowest going back to the early 1800s.

The weak data added to caution ahead of Federal Reserve Chairman Ben Bernanke’s semiannual testimony before congressional panels on Tu esday and Wednesday. Investors will parse his words for clues about the possibility and timing of another round of stimulus.

Central banks from Europe, China and Brazil earlier this month cut interest rates to bolster fragile growth, underscoring growing worries about a slowing global economy. But analysts said Bernanke is likely to remain non-committal.

“While this morning’s U.S. consumer spending report hardens the case for (a third round of quantitative easing), it does not change our view that nothing new will come from Bernanke on Tuesday and Wednesday,” said Kathy Lien, managing director of FX Strategy for BK Asset Management in New York.

“He will definitely leave the door open to more stimulus. However, he won’t provide any clear-cut signals on the timing, which is what investors really want to hear.”

U.S. retail sales fell 0.5 percent in June, the third straight month of decline, as demand slumped for everything from cars and electronics to building materials, a sign the economic recovery is flagging.

The MSCI world equity index fell 0.1 percent to 309.19.

U.S. stocks fell after a steep rally on Friday, but Citigroup Inc rose after the bank posted stronger-than-expected profit. Concerns about how the economy might be impacted by slowing growth and issues in Europe have pressured equities in recent weeks.

The Dow Jones industrial average was down 53.40 points, or 0.42 percent, at 12,723.69. The Standard & Poor’s 500 Index was down 3.38 points, or 0.25 percent, at 1,353.40. The Nasdaq Composite Index was down 8.87 points, or 0.30 percent, at 2,899.60.

European shares slipped a 0.01 percent to 1,042.12.


The euro was broadly weaker on fears that further delays to the mobilization of bailout funds to troubled debtor states could hurt efforts to tackle the region’s debt crisis.

Europe’s common currency was down 0.1 percent against the dollar at $1.2238, after falling as low as $1.2173, not far from a two-year low of around $1.2160 hit last week.

It fell to 78.33 pence against sterling, its weakest since late 2008, but was last at 78.39 pence, down 0.3 percent. The euro also dropped to 96.14 yen, its lowest since June 1, and hit a record low against the Canadian dollar.

Germany’s Constitutional Court said on Monday it would not rule until Sept. 12 on whether the euro zone’s bailout fund -- The European Stability Mechanism -- and planned changes to the region’s budget rules are compatible with German law.

The euro was also hurt by a report suggesting a change in the European Central Bank’s stance on how some bondholders could be treated under Spain’s bank bailout.

The Wall Street Journal said ECB President Mario Draghi advocated imposing losses on holders of senior bonds issued by the worst-hit Spanish savings banks.

The ECB declined to comment on the report, which also said finance ministers rejected the advice due to concerns financial markets would react badly to such a decision.

In commodities trading, oil prices rose above $103 a barrel, supported by weekend comments from China’s Premier Wen Jiabao that Beijing would step up its efforts to boost the economy. China is the world’s second-largest oil consumer.

Brent crude was up 85 cents to $103.25 a barrel. U.S. oil rose 27 cents to $87.37 a barrel.

Spot gold gained slightly to about 1,593 an ounce.

The benchmark 10-year U.S. Treasury note price was up 12/32, the yield at 1.4504 percent.

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